How to Buy Options on thinkorswim: A Beginner Guid

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Whether you are day trading quick momentum moves or swing trading multi-day trends, this complete walkthrough breaks down every essential step on the thinkorswim (TOS) platform by Charles Schwab.

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1. What Is the First Thing You Do to Create an Order on thinkorswim?

To buy an option on thinkorswim, your journey begins in the All Products option chain. Here is the exact order entry sequence:

1. Navigate to the Trade Tab: Open desktop thinkorswim or the web platform and click on Trade > All Products.
2. Input the Underlying Ticker: Enter your stock symbol (e.g., SPY, NVDA, AAPL) in the top symbol search box.
3. Expand the Option Chain: Select your desired expiration cycle (e.g., weekly contracts for day trading, or 30–60 DTE for swing trading).
4. Click the ASK Price to Buy:
   • To buy a Call (bullish), click the Ask price on the left side.
   • To buy a Put (bearish), click the Ask price on the right side.
5. Verify the Order Confirmation Bar: Clicking the Ask price generates a green BUY TO OPEN order row at the bottom of your screen where you set your limit price and quantity.

For automated setups before submitting orders, check out our companion thinkorswim OCO Bracket Trade Calculator to configure entry and stop parameters instantly.

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2. Should Your Order Be at the Bid or the Ask?

A common beginner question is whether you should execute at the Bid price or the Ask price:

• The Bid: The highest price buyers are currently willing to pay. If you sell an option with a market order, you fill here.
• The Ask: The lowest price sellers are willing to accept. If you buy an option with a market order, you pay this price.
• The Mid-Price (The Sweet Spot): The mathematical middle between the Bid and the Ask:
  Mid Price = (Bid + Ask) / 2

Pro Tip: Never send a raw "Market Order" on options. Always use a Limit Order set near the Mid-Price or 1–2 cents above it. This prevents slippage on wide spreads and ensures you don't overpay upfront premium.

You can learn more about standard exchange pricing models directly on the Investopedia Bid-Ask Spread Guide or explore underlying market momentum on our day trading strategies hub.

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3. Calls vs. Puts: How to Decide Which Way to Go

Deciding whether to buy a Call or a Put comes down to market trend direction and thesis:

Option Strategy	Market Direction	Profit Condition	Breakeven Formula
Long Call	Bullish (Expecting price rise)	Stock breaks above strike + premium	Strike Price + Premium Paid
Long Put	Bearish (Expecting price decline)	Stock breaks below strike - premium	Strike Price - Premium Paid

To confirm institutional volume and catalyst direction before entering either side, screen your symbols using our free High-Demand Options Momentum Scanner or streamline trade research using the AI Stock Analysis Prompt Generator.

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4. How to Calculate Option Purchase Cost and Breakeven

Every standard equity option contract controls 100 shares of underlying stock. When you see a quoted price on thinkorswim, multiply it by 100:

Total Buying Cost Formula:
Total Investment ($) = Premium Quote × 100 × Number of Contracts + Fees

Example Calculation:

• Stock: XYZ trading at $100
• Strike Selected: $100 Call
• Option Premium (Ask): $3.50
• Contracts: 2
• Total Upfront Cash Required: $3.50 × 100 × 2 = $700.00
• Call Breakeven at Expiration: $100 + $3.50 = $103.50
• Put Breakeven at Expiration: $100 - $3.50 = $96.50

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5. Managing Risk: Calculating Stop-Loss & Take-Profit Percentages

Preserving capital is the number one priority for day and swing traders. Because options experience volatility decay and leverage swings, define your exit targets before submitting the order:

• Stop-Loss (Protection): Entry Premium × (1 - Loss %)
  Example: A 20% stop on a $3.50 option = $3.50 × 0.80 = $2.80 limit exit.
• Take-Profit (Target): Entry Premium × (1 + Profit %)
  Example: A 40% gain target on a $3.50 option = $3.50 × 1.40 = $4.90 limit exit.

On thinkorswim, configure these directly on your order line by switching the order type dropdown to 1st Triggers OCO (One-Cancels-Other). This simultaneously places both your profit order and protective stop order the moment your entry fills.

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